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12 July 2018
Is HMRC targeting expats? According to The Telegraph, HMRC made 1,006 requests to foreign revenue authorities in 2017 for assistance with the recovery of tax debt.
The figures, obtained under a Freedom of Information request, show that these requests resulted in the recovery of £5.7m of tax, an almost threefold increase in the £2m recovered the previous year.
The tax collected is still modest (£574.9 billion total tax revenues the 2017 year) and in the absence of a further breakdown of the figures it is difficult to tell what has given rise to that leap from £2m to £5.7m in a single year.
Given the modest total, a handful of additional, significant tax debts could give a higher than usual amount recovered. However, as I comment on the Telegraph article, the figures are certainly further evidence of HMRC’s more muscular approach to tax compliance and enforcement and the department’s focus on tax investigations targeting offshore avoidance and evasion.
Politicians and public alike have put pressure on HMRC to be seen to ‘do more’. Those offshore initiatives have included carrots and sticks, exchanges of information, disclosure opportunities and new penalties and powers.
These new powers and information exchanges include:
• UK-Swiss Agreement
• Agreements with the Isle of Man and Channel Islands
• Liechtenstein Disclosure Facility
• The Requirement to Correct
• Worldwide Disclosure Facility
• Common Reporting Standard
Beyond exchanges of information with other revenue authorities which can assist in the identification of evasion and avoidance, HMRC can rely on further agreements to assist with the recovery of debts.
To quote HMRC’s 2013 policy statement on offshore evasion, there are ‘no safe havens’ and at least from European and some other jurisdictions, HMRC may still able to collect taxes from non-UK residents.
The specific mechanism for the recovery of these debts is the Mutual Assistance and Recovery Directive, agreed with the intention of improving cooperation and communication between EU Member States and enabling them to recover taxes or duties with the help of EU partner countries. As explained by my colleague Sharon Collier, the Directive demands that European states dedicate sufficient resources to adequately meet recovery assistance requests from other members.
These powers can be employed to collect a wide range of tax debts and, as I mentioned in the Telegraph article, HMRC has also issued accelerated payment notices (APNs) to non-UK residents.
HMRC has issued thousands of such notices to taxpayers who have previously participated in disputed schemes. They require the taxpayer to pay the disputed tax upfront, thereby removing what was perceived to be a cash flow advantage.
Whether such debts can be collected under the provisions of MARD might be arguable, as the MARD requires the tax to be collected not to be in dispute; however, by definition APNs concern tax liabilities that are under dispute and taxpayer retains the right to appeal the underlying tax liability (though not the APN itself).
MARD has been directly transposed into UK domestic law through primary domestic legislation and so will remain in force after Brexit and therefore with the Common Reporting Standard coming into full effect later in 2018, we can expect to see greater use made by HMRC of this facility to recover debts from non-UK residents.